The property/casualty insurance industry ended the third quarter of 2012 in extremely strong financial condition, and is fully prepared for the enormous costs of Hurricane Sandy, according to I.I.I. president Dr. Robert Hartwig.
In his commentary on the industryÃ¢â‚¬â„¢s 2012 first nine months results, Dr. Hartwig notes that policyholdersÃ¢â‚¬â„¢ surplus rose to a record $583.5 billion as of September 30, up $12.8 billion or 2.2 percent from the previous record high of $570.7 billion as of March 31, 2012, and up $33.2 billion or 6.0 percent from $550.3 billion at year-end 2011.
Dr. Hartwig comments:
During 2011, policyholdersÃ¢â‚¬â„¢ surplus actually shrank by 4.6 percent as catastrophes took their toll. The fact that the industry was able to rapidly recoup those losses and maintain such a strong capital position through the first nine months of 2012 ahead of Hurricane Sandy is further evidence of the P/C insurance industryÃ¢â‚¬â„¢s remarkable resilience in the face of extreme adversity.
The bottom line is that the industry is, and will remain, extremely well capitalized and financially prepared to pay very large scale losses in 2013 and beyond despite the fourth quarter impact of Hurricane Sandy.Ã¢â‚¬
Other key takeaways from the industryÃ¢â‚¬â„¢s 2012 first nine months results: profitability rebounded driven by a sharp drop in catastrophe losses and a marked acceleration in premium growth.
According to ISOÃ¢â‚¬â„¢s PCS unit, catastrophe losses plunged by more than half (51 percent or $16.6 billion) to $16.2 billion in the first nine months of 2012 from $32.8 billion in the first nine months of 2011.
Note: the results for the first nine months of 2012 do not include the impacts of Hurricane Sandy, which slammed into the Northeast United States in late October.
Net written premiums were up 4.2 percent in the first nine months, a full point above the 3.2 percent gain recorded in the year-earlier period. Dr. Hartwig predicts that net written premiums for full-year 2012 will likely expand at their fastest pace in nearly a decade.
The P/C industryÃ¢â‚¬â„¢s overall net income after taxes (profits) surged in the first three quarters of 2012 by 221.7 percent to $27.0 billion from $8.4 billion in the year earlier period.
The industryÃ¢â‚¬â„¢s annualized statutory rate of return on average surplus was 6.3 percent during the first nine months of 2012 (6.6 percent after excluding mortgage and financial guaranty insurers), up from 2.0 percent in the first nine months of 2011 (3.1 percent after excluding mortgage and financial guaranty insurers).
The results were released by ISO and the Property Casualty Insurers Association of America (PCI).